Although inflation came in slower than expected last month, it is still at an uncomfortably high level. And the Fed is expected to remain adamant and continue with its aggressive rate hikes to bring inflation down to a benchmark target rate of 2%.

“Whatever progress we’ve seen has to be sustained a month from now, when we get the August CPI report,” Greg McBride, chief financial analyst at Bankrate.com. said. “Otherwise, this will be quickly forgotten. So I think it’s a little bit early to be revising the Fed’s forecast based on a number that may not be repeated next month,” he added.

However, grocery/big box retailers should witness steady demand despite the inflationary environment. Companies in this space tend to hold on well due to the inelastic demand for their products and their ability to pass on rising costs to consumers.

Given the backdrop, here are three fundamentally sound grocery/big box retailer stocks, BJ’s Wholesale Club Holdings, Inc. (BJ), Casey’s General Stores, Inc. (CASY), and Albertsons Companies, Inc. (ACI), that should continue to deliver steady returns.

BJ’s Wholesale Club Holdings, Inc. (BJ)

BJ operates warehouse clubs in the United States. It provides perishable, general merchandise, gasoline, and other ancillary services. 

On June 10, the company announced opening four new clubs in Noblesville, IN., New Albany, OH., Wayne, N.J., and Midlothian, V.A., as a part of its expansion plan. This should help increase the company’s customer base.

BJ’s net sales increased 22.4% year-over-year to $5.01 billion in the fiscal quarter ended June 30, 2022. Total revenues increased 22.2% from the prior-year quarter to $5.10 billion, while the operating income came in at $202.91 million, up 23.9% year-over-year. Its EPS stood at $1.03, up 28.8% from its year-ago value.

Street expects BJ’s revenue for the fiscal quarter ending January 2023 to come in at $4.78 billion, indicating a 9.8% year-over-year increase. Its EPS is expected to improve 3.3% year-over-year to $0.83. The company beat the consensus EPS estimates in each of the trailing four quarters.

Over the past year, the stock has gained 36.6% to close the last trading session at $73.78.

BJ’s fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

BJ is rated B in Value, Growth, and Sentiment. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #14 of 38 stocks.

Click here to see additional POWR Ratings for Momentum, Stability, and Quality for BJ.

Casey’s General Stores, Inc. (CASY)

CASY operates convenience stores under the Casey’s and Casey’s General Store names and offers freshly prepared foods, such as pizza, donuts, and sandwiches; beverages; tobacco and nicotine products; health and beauty aids; automotive products; and other non-food items.

On June 14, CASY and MTN DEW announced the launch of a new flavor line-up MTN DEW OVERDRIVE™ that would be exclusively available in more than 2400 Casey’s convenience stores. The addition of a new flavorful product should add to the company’s revenues.

CASY’s total revenue increased 45.4% year-over-year to $3.46 billion in the fiscal quarter ended April 30, 2022. Net income came in at $59.78 million, up 43.4% year-over-year, while its net income per share grew 42.9% from the year-ago value to $1.60. The company’s adjusted EBITDA stood at $165.51 million in the same period.

Analysts expect CASY’s revenue for the fiscal quarter ending October 2022 to come in at $4.43 billion, indicating an increase of 35.7% year-over-year. Also, the company’s EPS is expected to grow 6.4% year-over-year to $2.76 in the same period. CASY surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.

CASY has gained 20.6% over the past six months to close the last trading session at $221.90.

CASY has an overall rating of A, translating to Strong Buy in our proprietary POWR Ratings system. The stock has a B grade in Quality and Sentiment. In the Grocery/Big Box Retailers industry, CASY is ranked #11.

Click here to get CASY’s ratings for Momentum, Value, Growth, and Stability.

Albertsons Companies, Inc. (ACI)

ACI engages in the operation of food and drug stores in the United States. It offers grocery products, general merchandise, health and beauty care products, pharmacy, fuel, and other items and services.

For the fiscal quarter ended June 18, 2022, ACI’s net sales and other revenue came in at $23.31 billion, up 9.6% year-over-year. Its operating income was $760.10 million, up 10.6% year-over-year, while its net income came in at $484.20 million, up 8.9% year-over-year. Also, its net income per share was $0.84, up 7.7% year-over-year.

The consensus EPS estimate of $0.56 for the fiscal quarter ending August 2022 represents a 7.4% improvement year-over-year. The consensus revenue estimate of $17.62 billion for the same period represents a 6.7% increase year-over-year.

ACI has gained 8.6% over the past month to close the last trading session at $28.77.

It is no surprise that ACI has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Value and a B for Growth, Quality, and Sentiment. ACI is ranked #2 in the same industry.

Click here to see the additional POWR Ratings for ACI (Stability and Momentum).

BJ shares were trading at $73.06 per share on Monday morning, down $0.72 (-0.98%). Year-to-date, BJ has gained 9.09%, versus a -11.97% rise in the benchmark S&P 500 index during the same period.

Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.

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